Fixed Income

13. Curve-Based and Empirical Fixed-Income Risk Measures practice questions

13. Curve-Based and Empirical Fixed-Income Risk Measures is part of CFA Level I Fixed Income. Fixed Income questions focus on bond cash flows, yield measures, duration, convexity, credit risk, securitization, and curve interpretation. Use this page to review the controlling ideas, then work through 7 questions with answer explanations and common traps.

Review the worked explanations before moving into adaptive practice. The app version can mix this topic with due reviews and weak related concepts.

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What to know

Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.

How to practice

Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.

Review signal

Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.

Very Difficult

Fixed Income

13. Curve-Based and Empirical Fixed-Income Risk Measures

A callable bond is valued at 100.0. If benchmark yields decrease by 50 bps, the bond value is 103.2. If benchmark yields increase by 50 bps, the bond value is 98.6. The bond's effective duration is closest to:

Moderate

Fixed Income

13. Curve-Based and Empirical Fixed-Income Risk Measures

Key rate duration is most appropriately used to measure a bond's sensitivity to:

Easy

Fixed Income

13. Curve-Based and Empirical Fixed-Income Risk Measures

For a bond with an embedded option, the most appropriate interest rate risk measure is generally:

Easy

Fixed Income

13. Curve-Based and Empirical Fixed-Income Risk Measures

Key rate duration is most useful for measuring price sensitivity to:

Moderate

Fixed Income

13. Curve-Based and Empirical Fixed-Income Risk Measures

A bond has an effective duration of 6.1 and effective convexity of 40. For a 50 bp increase in benchmark yield, the estimated percentage price change is closest to:

Moderate

Fixed Income

13. Curve-Based and Empirical Fixed-Income Risk Measures

Empirical duration is best described as a duration estimate based on:

Very Difficult

Fixed Income

13. Curve-Based and Empirical Fixed-Income Risk Measures

A portfolio has key rate durations of 1.5 at the 2-year point, 3.0 at the 5-year point, and 2.0 at the 10-year point. If the 2-year key rate rises 10 bps, the 5-year key rate is unchanged, and the 10-year key rate falls 20 bps, the estimated percentage price change is closest to: